IB microeconomics notes

Demandisthequantity
COCO
ofa or that
OMCS
are
good service customers
willingandabletobuyatagivenprice i
a particularperiod oftime
Refers tothewillingnessandabilityofconsumerstopayacertaininamarkettoobtainparticul
gls
riceistheamountofmoneyconsumerspaytopurchase agoodofservice
awofdemand thequantitydemandedof agoodorservicefallsaspricerisesceterisparibas


affifffftiliffhffithallsthereal of isparibus
income consumersrises ceter hismeanstha
consumers areabletobuymoreproductsatlowerprices

Thesubstitutioneffectasthepriceof sfallsmoreconsumersareableto
ag paysotheyaremorelikelytobuytheproduc
thatis substituteitforalternativeproductsthatconsumersmighthavepreviouslybought
Theawofdiminishingmarginalutility aspeopleconsumemoreofaarticulargoodservice heutilitysatisfaction
gainedfromhemarginalunitof
consumptiondeclines tenceconsumerswillpurchasemoreofthe
sameproductonly alowerprat
the the
demandcurveshows inverserelationshipbetween andquantitydemanded
price
ofa product Howmuchofproductisdemandedatdifferentprices
asthepriceincreasesfrompi pathe
quantitydemandedcontractsfromQ1 Q2
QD
92 asthewillingnessavailabilitywillfall

Relationshipbetweenanindividualconsumer'sdemand marketdemand
marketdemandcurve refers sumtothe ofall
individualconsumer'sdemand foraproductin a
marketatagivenpricelevel
Amarketisanyplacewheretransactionstakeplacebetweenbuyersandsellers
on pricedeterminants Habitsfashiontastes income substitutes complements advertising
of demand governmentpolicies economy

Movementsalongthedemandcurve shiftsofthedemandcurve
Achangeinpriceofglscauses amovementalongthedemandcurve
Anincrease inpricewillcause a contraction inQD
AreductioninpricewillcauseanexpansioninQD

fallinthepricefromp1topacausesdemand
III
fifansion
toexpandfromQ1 Q2leterisparibus

a a bQD Achangeinthenonpricedeterminantsthataffectdemandcausesashiftinthedemandcurve
but amovementalongademandcurveiscausedbychangesinthepriceofaproduct

, Supplyreferstothequantityofglsthafirmsarewilling abletosellatanygivenpricepertimeperio
awofsupply hereis apositiverelationshipbetweenthequantitysuppliedofaproduct itsprice
ceterisparibus
2reasons forthislaw Existingfirmsinthemarketcanearnhigherprofitmarginsiftheysupply
more
to
Morefirmsenterthemarketashigherpricesallowthem coverproduction
costsandearn a profit
Impenunderlynheawofurly
heawofdiminishingmarginalreturns occurswhenemployingadditionalvariablefactorsofproduction
causesthemarginalreturnadditionaloutput toeventuallydecline
increasingmarginalcosts occurswhenthe additionalcosts eachextraunitofoutputstarttorise
of
duetodiminishingmarginalreturns oncefirmsareonlywillingandabletoincreaseproduction
if
theyrelieveahigherpricefortheadditionalunitsofoutput
Marginalcostreferstothecostofproducinganadditionalunitofoutoutcalculatedby
JTCDQ
theprincipleofincreasingmarginalcostsunderpinsthelawofsupplysothesuppl
curveslopesupwardsbecausehigherpricesarenated tocoverthehighermarginal
costsofproductionwhena increasesits output
prices i onlyappliesinthe5R
firm
whatarethenonpricedeterminantsofsupply
costsof F0P Priceofrelatedgoods indirecttaxes subsidies
Quantityunits futurepriceexpectations changesintechnology the offirmsinth
a a industry
competitivesupply referstothe of
production oneoranother afirmthegoodscompetefor
byone th
use thesameresources producingmore
of of meansproducingless the
of
other
Jointsupply Anincrease intheproductionofoneproductautomaticallyincreasesthesupplyo
anotherproduct
financialassistancefromthegovernmenttoencourageproductionofcertainproducts
Subsidies
reducingcosts
by